Automotive industry in China

The automotive industry in China has been the largest in the world measured by automobile unit production since 2008.[1][2][3] Since 2009 annual production of automobiles in China exceeds that of the European Union or that of the United States and Japan combined.

China's automobile industry had Soviet origins mainly (plants and licensed auto design were founded in 1950s with the help of USSR) and had small volume for the first 30 years of the republic, not exceeding 100-200 thousands per year. It has developed rapidly since the early 1990s. China's annual automobile production capacity first exceeded one million in 1992. By 2000, China was producing over two million vehicles. After China's entry into the World Trade Organization (WTO) in 2001, the development of the automobile market further accelerated. Between 2002 and 2007, China's national automobile market grew by an average 21 percent, or one million vehicles year-on-year. In 2006, China’s vehicle production capacity successively exceeded six, then seven million, and in 2007, China produced over eight million automobiles.[7] In 2009, China produced 13.79 million automobiles, of which 8 million were passenger cars and 3.41 million were commercial vehicles and surpassed the United States as the world's largest automobile producer by volume. In 2010, both sales and production topped 18 million units, with 13.76 million passenger cars delivered, in each case the largest by any nation in history.[8]

The number of registered cars, buses, vans, and trucks on the road in China reached 62 million in 2009, and is expected to exceed 200 million by 2020.[9] The consultancyMcKinsey & Company estimates that China's car market will grow tenfold between 2005 and 2030.[10]

The main industry group for the Chinese automotive industry is the China Association of Automobile Manufacturers (中国汽车工业协会).

Zhang Xueliang founded his arsenal to make one truck called Ming Sheng in 1931.

Another general, Yang Hucheng, patronized the inventor Tang Zhongming to make a new type of mobile energized by charcoal.These charcoal cars are primary vehicles during World War II in China,considering the blockade by Japan.

March 10, 1958: The first 2½ ton light duty truck (NJ130), which was based on Russian GAZ-51, was produced in Nanjing. The truck was named Yuejin (meaning "leap forward") by China's First Ministry of Industrial Machinery.

June 1958: Nanjing Automobile Works, previously a vehicle servicing unit of the Army, was established. The truck production continued until the last truck (NJ134) rolled off the assembly line on July 9, 1987. Cumulative production was 161,988 units (including models NJ130, NJ230, NJ135 and NJ134).

The passenger car industry was a minor part of vehicle production during the first three decades of China’s socialist economy. As late as 1985, the country produced a total of only 5,200 cars. To announce that the desire for consumer goods was no longer politically suspect and stimulate personal spending, while also advertising the opening of the Chinese market to foreign producers, a fabricated news story about China's first peasant to own a car was distributed across the world.[12] Sun Guiying, a chicken farmer from near Beijing was touted has having purchased a silver Toyota Publica with her earnings.[13] While the article was largely fraudulent (Mrs. Guiying did not know how to drive, and her husband was a senior official rather than a peasant),[14] the message came across loud and clear. Car sales shot through the roof, although they were almost entirely purchased by danweis (work units - private car ownership was virtually unknown at the time, in spite of the Sun Guiying story).[15]

As domestic production was very limited, import totals rose dramatically, despite a 260 per cent import duty on foreign vehicles. Before 1984, the dominant exporter of cars to China had been the Soviet Union. In 1984, Japan's vehicle exports to China increased sevenfold (from 10,800 to 85,000) and by mid-1985 China had become Japan's second biggest export market after the US.[16] The country spent some $3 billion to import more than 350,000 vehicles (including 106,000 cars and 111,000 trucks) in 1985 alone. Three taxi companies in particular thirsted for Japanese cars, such as Toyota Crowns and Nissan Bluebirds.[17]

As this spending binge began to lead to a severe trade deficit, the Chinese leadership put on the brakes, both through propaganda efforts and by making foreign exchange much less accessible.[18] Customs duties on imported goods were raised in March 1985 and a new "regulatory tax" was added a little later. In September 1985 a two-year moratorium on nearly all vehicle imports was imposed.[18]

While limiting imports, China also tried to increase local production by boosting the various existing joint-venture passenger car production agreements, as well as adding new ones. In 1983, American Motors Corporation (AMC, later acquired by Chrysler Corporation) signed a 20-year contract to produce their Jeep-model vehicles in Beijing. The following year, Germany’s Volkswagen signed a 25-year contract to make passenger cars in Shanghai, and France’s Peugeot agreed to another passenger car project to make vehicles in the prosperous southern city of Guangzhou.[17] These early joint ventures did not allow the Chinese to borrowing much foreign technology, as knock-down kit assembly made up the majority of manufacturing activities;[19] tooling may not have been allowed to slip past borders.

Guangzhou Automobile Industry Group - Peugeot : Peugeot 504 (subsequently defunct). However, in the nineties, Honda replaced Peugeot as the partner of Guangzhou Auto, and began producing the Accord and later the Fit with huge success. In 2006, it started to manufacture Toyota Camry, also with considerable success. Guangdong province is now the center of the manufacturing of Japanese makes in China.

China had a total of 6,322 automotive enterprises as of the end of November 2006.[citation needed] The total output value of the automotive sector for the first three quarters of 2006 was US$143 billion.[citation needed] As incomes increase the high annual growth rate of private ownership is expected to accelerate.

China surpassed Japan to become the world's second-largest vehicle market in 2006, and passed the United States to become the largest in 2009.[citation needed] This growth is spurring demand for automotive parts, services, and after-care products. China is presently capable of manufacturing a complete line of automobile products and large automotive enterprises. Major domestic firms include the China First Automobile Group Corp. (FAW), Dongfeng Motor Corp. (DMC) and Shanghai Automotive Industry (Group) Corp. (SAIC).

China encourages the development of clean and fuel efficient vehicles in an effort to sustain continued growth of the country’s automobile industry (see Fuel economy in automobiles). By the end of 2007, China plans to reduce the average fuel consumption per 100 km for all types of vehicles by 10%. The proportion of vehicles burning alternate fuel will be increased to help optimize the country's energy consumption. Priority will be given to facilitating the research and development of electric and hybrid vehicles as well as alternate fuel vehicles, especially CNG/LNG. Major cities like Beijing and Shanghai already require Euro III emission standards. In 2009, Beijing will be the first city to require GUO IV emission standards (Euro IV emission standards).

China has agreed to lower tariffs on imported auto parts and accessories to 10%. Although this difference in duty rate was initially[when?] responsible for an increase in motorcycle and car kit imports, the loophole has been tightened. Now, only replacement parts and accessories enter China under the lower duty level.[citation needed]

Used cars can be imported to China although some restrictions apply. Refurbished heavy construction equipment can be imported with a special permit. Used and refurbished auto parts are not allowed to be imported into China.

Although improvements have been made in this field in the past decade, China's after-sales products and services still lag far behind those of developed countries.[citation needed] However, WTO commitments have brought about significant changes in the after-sales market. China's after-sales market now faces the following challenges:

Establishing an information feedback system with end-users in order to improve service;

In China, authorized car dealership are called 4S car shops. The 4S represents Sale, Sparepart, Service and Survey. 整車销售(Sale)、零配件(Sparepart)、售後服务(Service)、信息反馈(Survey).

In most cases, brand-name new cars can be purchased only from 4S shops. For new cars in high demand, a high premium is added for instant delivery or just placing an order.

The profit of car dealers in China is quite high comparing to the rest of the world, in most cases 10%. This is due to the non-transparent invoice price as announced by manufactures and to the premiums they charge for quick delivery. Due to the lack of knowledge for most customers, dealers can sell add-ons at much higher prices than the aftermarket.

As of 2012 exports of Chinese automobiles were about 1 million vehicles per year and rapidly increasing. Most sales were made to emerging economies such as Algeria, Brazil, Chile, Egypt, Iraq, Iran, the Philippines, Russia, Saudi Arabia, South Africa, or Syria[4] where a Chinese-made automobile such as a Geely, Great Wall, or Chery sells for about half of what a comparable model manufactured by a multinational brand such as Toyota does. The Chinese cars are based on multinational designs but cheaply made; they are particularly lacking in safety features. Cars made in China by multinational joint ventures are generally not exported. The quality of Chinese cars is rapidly increasing but, according to J. D. Power and Associates, is not expected to reach parity with multinational manufacturers until about 2018.[27]

Shanghai General Motors (上海汽车集团股份有限公司), also known as SAIC (上汽) and SAIC-GM (上汽通用), is a Chinese state-owned automotive manufacturing company headquartered in Shanghai operating in joint venture with US owned General Motors. The company had the largest production volume of any Chinese automaker in 2014 making more than 4.5 million vehicles.[29]

Chang'an Automobile Group (重庆长安汽车股份有限公司, abbreviated to 长安) is an automobile manufacturer headquartered in Chongqing, and is a state-owned enterprise. In 2014, the company ranked fifth in terms of output making 2.1 million vehicles in 2014. Changan designs, develops, manufactures and sells passenger cars sold under the Changan brand and commercial vehicles sold under the Chana brand. Foreign joint venture companies include Suzuki, Ford, Mazda and PSA Peugeot Citroën.

Other notable Chinese automotive manufacturers include: JAC (江淮), the sixth biggest manufacturer in 2014, Great Wall, the seventh biggest manufacturer in 2014, the largest manufacturer of SUVs and a major exporter, Chery, which exports passenger cars worldwide, BYD Auto, the ninth biggest manufacturer in 2014, and Geely, which gets its name from the chinese word “auspicious” 吉利 and was the tenth largest manufacturer in 2014. A notable Taiwanese automotive manufacturer is Yulon.

Domestic dealerships have been known to take advantage of this and replace the badging of BYD vehicles with those of other car manufacturers, including Toyota.[42] Micheal Austin, vice president of BYD America, has acknowledged the issue saying that the practices done by dealers (which are franchised) has made BYD "uncomfortable".[42] Even the US government has criticized BYD's practices, with a WikiLeaked document from the US Consul-General to Guangzhou (Brian Goldbeck) referring to BYD's practice of copying in a document entitled "BYD seeks to 'Build Your Dreams' -- based on Someone Else's Designs".[42]

After mediation attempts failed, GM Daewoo brought a case against Chery in a Shanghai court, but by 2005 jurisdiction had been moved[47] to the Beijing No.1 Intermediate People's Court.[48]

Around that time Chinese state officials, including a vice-minister of commerce and a vice-director of the State Intellectual Property Office, publicly supported Chery.[48] It was suggested that GM may have not patented its technology.[48] In late 2005 the lawsuit was settled.[45]

In May 2009 a Greek judge ruled against Daimler and cleared the car allowing sales to begin in Greece. The judge answering to Daimler's demand to ban the Chinese vehicle from entering the Greek market said that “The impression the Noble makes on a third and informed party by its visual appearance is different to the one that is made to the same person by the Smart. . . It is commonly accepted that the decision over buying a new car cannot be based only on the exterior characteristics but many other technical specifications such as the power of the engine, fuel consumption, trim specification, retail price and dealers’ network.”[53]

The ruling states that the latter party’s doings “cannot possibly misguide the public” as the German company claimed in its legal request. The judge noted the salient fact that “the plaintiff is no longer selling the specific generation of the Smart which claims to have been copied, but a different vehicle, with much different characteristics.”

The Wall Street Journal reported that the government of China will be forcing foreign carmakers to disclose their electric vehicle technology secrets before the vehicles are allowed to be sold in China. The current Chinese automotive policy states that a foreign carmaker must form a joint-venture with a Chinese carmaker if the former plans to sell its electric vehicles there, with the Chinese carmaker owning 51% of the joint venture.

Due to this threat by the Chinese government, Toyota postponed the launch of the current-generation Prius until they learn more about the plan.[54]